Outlook of the Year 2018

From the home buyers to the developers all were waiting for the actual consequences to be seen which will be mostly seen in 2018, www.infrabuddy.com, spoke to the stalwarts of the sector on their predictions for 2018 and views on how 2017 was for the sector…

As the New Year begin, infrabuddy.com tried to take a look at the changes expected in this sector in the coming year. One of the main changes in 2017 was the Real Estate (Regulation and Development) Act, 2016 (RERA) that was enforced from May 1, 2017 brought all eyebrows up in the real estate fraternity. From the home buyers to the developers all were waiting for the actual results to be seen which will be mostly seen in 2018.

On this K. S .Chandrashekar, Managing Director, PARTHAM said, “The year 2017 for the real estate sector was full of turbulences due to domestication, RERA and GST. Now with the implementation of all and clarity coming, the turbulences is almost settled.  I therefore see the sector in two perspectives.

Firstly, the dis-organized sector will become more organized and system oriented. Many real estate developers who were mostly dis-organized and were in slumber for so many decades have woken up out of their luxuries and are putting their shelves in place. The developers who were organized are very happy to see that there is an emerging perfect competition in the market. On the other hand, the consumers who have been waiting and watching the happenings in 2017 shall gradually realize their trust and shall be ready to buy without fear.

So putting in a nutshell, the year 2018 for real estate is going to be growth oriented with win win situation for both developer and consumer. Although I am not seeing a very high growth in 2018, but yes the growth shall be gradual with better geometrical performances beyond 2018 which will convert in to a major economic growth nuclei. So the year 2018 can surely be coined as a take-off stage for further growth in the coming years.”

Dharmesh Jain, CMD of Nirmal pointed, “Policy changes in 2017 will bring good demand in 2018. With RERA in place the property buyers are now more confident than before. Completion of existing projects and new home launches will follow in good measure. Both demand and overall market will start picking up pace. 2018 will have positive markets for affordable housing. A rise in middle-income housing projects is predicted compared to low income housing and luxury projects should see innovation in design and development. While 2017 is said to be a reforming year, 2018 shall reap the benefits of these reforms.”

Also Rohit Poddar, Managing Director, Poddar Housing and Development Ltd said, “The government had announced the demonetization of Rs 1000/- and Rs 500/- currency notes on 8th November 2016. This was landmark steps that arrived at wiping out unaccounted money from circulation and reduce tax evasion. Due to this, the sales of residential units were impacted in first 3months of 2017. During this period investors with white money had also adopted a policy of wait and watch expecting decrease in the process. At Poddar housing, we were insulated from this situation because of 2 primary reason, our policy of accepting full cheque payment and the fact that we were targeting predominately the economically weaker section(EWS), middle income group 9MIG) since we cater to affordable home segments.

The two other significant developments in 2017 were GST rollout and implementation of RERA. Realty players faced challenges to align their business to comply with the GST guidelines. On the commercial front, since GST was applicable on purchase of homes and under construction projects, homebuyers were neither opting for completed project nor putting their purchase decision on hold. Theses combined factors led to decline in sales at 4.8% in quarter 3 of 2017 in 5 of top 7 cities. Some developers were therefore seen offering higher discounts to buyers. New launches in 2017 were also at a slower pace as developers were assessing market sentiment post RERA era.

RERA has completely changed the landscape of the real estate sector. These will results into a kind of correction in the real estate sphere.  Where only a few organized players will consolidate the sector and unscrupulous players will be eliminated. India needs 25 million homes in the affordable category. The interest subsidy under the credit linked subsidy scheme of Pradhan Mantri Awas Yojana ( PMAY) will play a major role in providing homes to economically weaker section and middle income group home buyers that to in an inclusive approach within the formal banking system.

In 2018, the demonetization impact that has started to take off will see a further southward movement which will be an encouraging business solution to be in for the developers. The higher transparency ON ACCOUNT OF RERA and further consolidation is a good sign to boost confidence of small investor who now have an options of in investing in real estate investment Trust (REIT’S) and facilitate greater volumes of foreign investments flows.

If there is a drop in home loan interest rates hen naturally this will lead to increase in the home loan disbursement. Meanwhile the regulators for housing finance companies, national housing banks and other industry related to real estate associations have written to the government authority to lower the effective GST rate for affordable housing project. This move will lead to improvement in demand for under construction homes.

The state government of Maharashtra is planning to bring in special law and change the existing rules to make the process of slum redevelopment easy. A special cell is about to be created to address the slum dwellers who oppose or delay the scheme. This will play a major role in creation of slum free city.

The real estate industry has been demanding a single window clearance scheme for all affordable housing projects under PMAY. In a business format of affordable housing where all developer operates on wafer –thin margin, the delay in approval is a major block. We really hope that a single window solution is provided with top priority.”

Added, Aniket Haware, Managing Director Haware Builders says,” 2017 is expected to be a year of amalgamation — with the outcomes of all policy initiatives taken in 2016 beginning to take shape. Most of the initiatives are aimed at improving transparency and improving overall investor as well as end user’s sentiment. The opening of the Real Estate Regulation Act was the most important reform that the real estate sector has seen in the recent times. RERA will not only help regulate the sector and promote transparency, but could also facilitate greater volumes of domestic as well as overseas investment flows. The confidence of home buyers is also likely to recover. The central has taken yet another step to improve transparency and accountability in the sector with modifications to the Benami Transactions Act 1988; with the new act coming into power from November 1, 2016. As the impact of these regulations unfolds in 2017, the sector’s future growth prospects in 2018 look brighter and 2018 will be the year of Expectations for both Developers as well as buyers.”

Also Rohit Gera, Managing Director, Gera Developments Pvt. Ltd, rightly pointed, “2017 will go down in the history of Indian real estate as the year that changed the sector forever. Never in the history of Indian real estate have so many major events taken place within such a short period of time.

The year started in the aftermath of demonetization with wild speculation and predictions that prices would correct 30% to 40% across the country. This as expected put a stop on new sales. As anticipated, such talk about price correction is music to anyone who is actively searching for home.

The government however did try to promote the real estate sector by loosening some of the conditions around the tax-free scheme for affordable housing. This along with the inclusion of middle income group into the category of people who can avail of the interest subsidy from the government pushed developers to reconfigure their product mix towards more affordable housing. As a result, the average size of homes launched has dropped drastically.

The other big impact has been the introduction of the real estate regulatory act (RERA). In one action, the government has made delivery to the customer a priority and simultaneously ensured that developers who earlier could launch a project with virtually no capital now require financial strength and capability before entering the business. This led to a cleaning up and weeding out of fly by night operators whose sole objective was to prey on hapless home buyers. The introduction of GST will further streamline the supply chain of developers and bring many small-time contractors and vendors into the GST net.

While India has improved on the ease of doing business rankings put out by the World Bank, the one stubborn category that barely moved was the ease of dealing with construction permits where the movement was from the rank of 185 to 181. Looking forward, unless the government addresses the ease of dealing with construction permits, there is no way India’s ranking can improve to the goal of 50. The government is determined to reach the rank of 50 and therefore one can certainly expect an improvement in dealing with construction permits which will further streamline and professionalize this sector in the near future.

For the real estate sector to actually start seeing a good momentum of sales (which is necessary to raise the overall GDP of the country) there needs to be a stable tax structure and tax regime. The current chatter around taxing the unsold ready inventory with developers further leads to instability in the mind of the home buyers.  This causes further deferment of the decision to buy a home.  This is detrimental to the industry and the economy.

As RERA settles down and the economy recovers from the impacts of demonetization and GST one can expect better days for the real estate sector in 2018.”

And so as it is seen, the year 2017, started on a slow note, with the sector still reeling under the shock of demonetization-a policy measure announced by the government in November, 2016 to flush out black money from the economy. To conclude Sachin Sandhir, Global Managing Director – Emerging Business, RICS, has aptly said that 2018 will continue to pose some challenges for the residential segment as far as home sales and prices are concerned. Developers will become more familiar with GST and RERA and this should help them plan their businesses better. Compliance could be a problem for some developers, resulting in consolidation in the sector. Office segment will continue to do well with strong office rentals. Home buyers will emerge as the ultimate winners with RERA acting as a panacea to most of their home buying woes.